Korea Zinc Co. is convening an extraordinary general meeting of shareholders on the 23rd, amid contrasting opinions from voting advisory firms regarding key issues that could significantly influence the decisions of the 'casting voter' National Pension Service and foreign shareholders.
Two domestic advisory firms that have formally contracted with the National Pension Service offered conflicting views. The National Pension Service typically contracts with two domestic voting advisory firms for opinions. This year, it is known to have signed service contracts with the Korea Environmental, Social, and Governance Standards Institute and the Korea ESG Research Institute.
Global advisory firms also expressed differing opinions. As a result, uncertainty is increasing over which side, MBK Partners or Chairman Choi Yun-bum, will gain the upper hand.
◇ Dissenting opinions on key issue 'cumulative voting system'
According to the investment banking (IB) industry on the 15th, the Korea Environmental, Social, and Governance Standards Institute agreed on the need for reform of the Korea Zinc board and advised institutional investors to oppose the introduction of the cumulative voting system proposed by Chairman Choi's board. The purpose of the cumulative voting system is to protect minority shareholders' rights; however, in this case, it could devolve into a means for Chairman Choi to defend his management rights.
The Korea Environmental, Social, and Governance Standards Institute judged that it is appropriate to appoint only seven directors instead of 14, but expressed support only for the director candidates recommended by MBK Partners and Korea Zinc. It recommended supporting the votes for seven candidates: Kang Seong-du (President of Youngpoong), Kim Kwang-il (Vice Chairman of MBK Partners), Kwon Kwang-seok (former President of Woori Bank), Byeon Hyun-cheol (former Director General of the Seoul High Court), Son Ho-sang (POSCO Chair Professor), Jeong Chang-hwa (former Head of Future Technology Research Institute at POSCO Holdings), and Cheon Jun-bum (lawyer and Vice Chairman of the Korea Corporate Governance Forum). In contrast, it expressed opposition to all seven candidates recommended by Chairman Choi's camp.
On the same day, the Korea ESG Research Institute also sent an agenda analysis report to institutional investors, offering contrasting views to those of the Korea Environmental, Social, and Governance Standards Institute. The Korea ESG Research Institute recommended support for the introduction of the cumulative voting system. While the cumulative voting system may be used as a means for Chairman Choi to defend his management rights, it could ultimately contribute to the protection of general shareholders' rights.
Additionally, while the Korea ESG Research Institute agreed with Chairman Choi's agenda that there should be a limit on the number of directors, it recommended that the board composition should be balanced. It expressed support for four candidates recommended by Chairman Choi (Choi Jae-sik, a professor at KAIST; James Andrew Murphy, a senior advisor at Oliver Wyman; Jeong Da-mi, Dean of the College of Business at Myongji University; and Lee Hyoung-kyu, an emeritus professor at Hanyang University Law School) and three candidates recommended by MBK Partners and Korea Zinc (Kang Seong-du, former Director General Byeon Hyun-cheol, and Kim Yong-jin, a professor at Sogang University).
These two advisory firms have formal contracts with the National Pension Service, making them a reference point when determining the direction of voting at the fiduciary responsibility committee meeting on the 17th. The National Pension Service holds 4.5% of the shares issued by Korea Zinc, making it a crucial casting voter that could influence the direction of management rights.
In addition to the Korea Environmental, Social, and Governance Standards Institute and the Korea ESG Research Institute, Sustainalytics, one of the 'top three domestic voting advisory firms,' previously sided with Chairman Choi on major agenda items on the 13th. It expressed support for the introduction of the cumulative voting system and the proposal to limit the number of directors to 19. However, among the director candidates, it recommended support only for those recommended by MBK Partners and Korea Zinc.
◇ ISS is friendly to MBK Partners-Yongpoong, while Glass Lewis is friendly to Choi
In this extraordinary general meeting of shareholders, foreign institutions are a casting voter as important as the National Pension Service. Foreign entities are reported to hold a 7% stake in Korea Zinc. In contrast, the combined equity stake of domestic institutions and individual investors is less than 1%.
When exercising voting rights, it is common for foreign institutions to refer to the opinions of advisory firms. It is known that 60-70% of foreigners investing in Korea tend to follow the opinions of ISS, while the rest follow Glass Lewis.
Previously, global advisory firms ISS and Glass Lewis expressed opposing positions regarding major agenda items. On the 9th (Korea time), ISS recommended opposing the introduction of the cumulative voting system proposed by Chairman Choi's camp. While the cumulative voting system generally benefits minority shareholders, in this case, it is seen as a tool for Chairman Choi to secure his position. ISS also recommended 'opposing' all seven outside director candidates recommended by Chairman Choi's camp. However, it sided with Chairman Choi regarding the reduction of the board size to 16 members.
In the case of Glass Lewis, it recommended supporting the introduction of the cumulative voting system and limiting the number of directors. It expressed favorable opinions only for the candidates recommended by Chairman Choi's camp. However, regarding this, MBK Partners and Korea Zinc criticized it as "excessively biased and logically inconsistent."